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Tuesday, 9 February 1999
Page: 2196


Mr BEAZLEY (3:32 PM) —One thing that we can absolutely guarantee is that, when they do not have the advantage of the immediate reply in question time, neither the Treasurer nor the Prime Minister is prepared to be in this place to defend their wonderful tax package—wonderful according to their definition. Well they might not be because, while they are pretty good in the coward's castle of question time, they are pretty ill placed when it comes to a debate where both sides have a reasonably even opportunity for a lengthy and detailed presentation.

We saw a very interesting thing last week. Last week, before the Senate GST committee, the facade of the argument of the government that it has attempted to use to protect its tax package cracked. It cracked decisively and it cracked at that point where there is a last element of preparedness amongst a minority of the Australian public to give a degree of credibility to its tax package, and that is the government's constant assertion that it was good for the economy.

Everybody knows that as far as their personal situation is concerned, they are likely to be worse off under it unless they are high income earners. Everybody knows that if they are a family they will almost certainly be worse off. Everybody knows that if they are a pensioner they will be worse off. However, constant assertions by governments from time to time that a particular action on their part is important for the economy and the nation will be given a degree of credibility by the credulous. But that last element of any form of support in the community had its position fundamentally undermined last week.

Yesterday in the media, and in question time yesterday and today, we saw an extraordinary effort by the government and their supporters to do a repair job on that cracked wall. Their effort to get away from people looking at this tax package in a way that affects them, their jobs and their livelihood by discussing a set of taxation benefits, the substantial proportion of which are paid for from the surplus and therefore are open to any particular government for any particular purpose to offer to people around the country, ought to be stripped away for what it is—an escape from the consequences of the undermining of the argument that they have put forward.

It has to be said that the Monash Centre has not been a friend of the Labor Party as the years have gone by. That centre has been a sea-green incorruptible group in favour of what has been termed from time to time `economic rationalism'. But the best that Professor Dixon, one of the pre-eminent economic modellers of this nation, could do for the government's tax package was to say, `Well, why would you bother?' So it ranges from this: the best you could say for the tax package is, `Why would you bother with it?' and the worst is, `It will cost you 100,000 jobs and will stultify job growth in all the principal areas of job growth now in the community.'

What has the Treasury had to say about this? On our side of the House, I was the principal participant in debate in the last election campaign. I would love a dollar for every occasion on which the Prime Minister came out with the Treasurer and said, `This package of ours is going to create employment opportunities in this country.' I would love a dollar for every time they said that. And when the press actually pinned the Treasurer down in the course of the election campaign and said, `On what do you base this simple assertion? Is it an act of faith?' he said, `Oh, no, we have done a stack of modelling.'

What happened last week before the goods and services committee of the Senate? A Treasury official, Mr Smith, said:

A critical fact here is that the government has not provided, and we have not given to the government, specific modelled predictions of most of these macro-economic effects. That is a deliberate decision . . .

He is then asked:

So which macro-economic figures are you saying you did not supply to the government?

Mr Smith —For example, we have not estimated precise impacts on employment and those types of variables.

It came as some surprise to Senator Conroy when this statement was made, as a person who has at least got a tenuous belief in the ability of the Treasurer to at least face some point adjacent to the truth on the activities of his own department. It goes on:

Senator CONROY —So you have never supplied the government with an estimate of employment growth?

Mr Smith —We have not sought to provide specific point estimates of the tax package on those sorts of figures.

Senator Conroy thought he would try something else:

Senator CONROY —What about employment or GDP growth?

Mr Smith —Not even GDP growth . . .

So what we have here is the Treasury, which have had a tax package for 18 months, which at least have a capacity to model every conceivable aspect of endeavour by government, be it on the outlays side or the tax side and the likely effect of it on the economy—you can disagree with their models, you can argue with them, and sometimes Treasury have been right and sometimes Treasury have been wrong, but they have a capacity to model that is more substantially funded than any other capacity in the Australian community—having had the package for 18 months and there has been no modelling. Why?

The reason there has been no modelling is simply this: we all intuitively know that not only is it right that, if you mount a tax on jobs, jobs will be lost but also it will be statistically right when placed in the hands of anyone with any degree of competence in regard to modelling the economy. And, of course, that is precisely what has happened.

Professor Dixon when he presented his `Why would you bother' argument to the Senate committee on the goods and services tax said that in the short term there might be 30,000 jobs. I heard the Treasurer quote it today in one of his usual misleading efforts in question time. What did he say about that 30,000? If they had read on, they would have discovered that he said it would be 30,000 because a portion of the surplus is spent. Yes, it is true, if you spend your surplus when you have got a surplus there is a very good chance you will create jobs. Governments have discovered over the years that these things occur. And when you spend the surplus and jobs are created I suppose you can then get up there and say that for that part of the package it creates jobs.

But when he got round to the GST and said that if anybody went out there and tried to claim it back by the wage process or whatever—and remember we are talking about a package, the price effects of which have been absolutely slaughtered as far as the Treasury estimates have been concerned by every single analyst of the price impact of a GST—in those circumstances you can absolutely guarantee that employees will make an attempt to get it back. Professor Dixon has said that it would cost 100,000 jobs in our economy.

Then we move over to Econtech and the preferred modeller of this government. The Treasury ought to be their preferred modeller. A taxpayer spends vast amounts of money to keep the Treasury in a position where they can model, but the government chooses not to use them. We move across to Murphy. Murphy offers the Housing Industry Association advice: `You are going to lose 20,000 jobs.' That is what he says to them. When really pushed about whether or not it will have any decent effect on the economy, perhaps 0.004 growth might actually occur as a result of this package is the best effort. Mr Murphy might well have said, along with Professor Dixon, `Why would you bother?'

When you actually get into the detail of it and you can see the cries from the heart of the charities like the Lifesaving Association and the St Vincent de Paul Society and the cries from the heart from the Housing Industry Association and, above all, the tourism industry, as they bring out their own models since the government will not bother with theirs, you know darn well that this is going to be a very bad tax for the Australian economy.

Another reason why Professor Dixon would say, `Why would you bother with this?' is the origins of this particular tax. In no country has it been introduced as a job generator. The tax was invented at a time when people thought you did not have to bother about it. It was in the midst of the postwar boom when job growth appeared to be going on forever. It was in the midst of the postwar boom when the big job generators were the large companies, not small business. Large companies, irrespective of taxation arrangements, these days choose labour saving production exercises and will constantly be reducing their work forces. Only small businesses create jobs now, by and large, as far as the private sector is concerned.

But, in a time when there were giant bureaucracies in the private sector and giant bureaucracies in the public sector, you could afford a giant bureaucratic tax. But, in circumstances where there are smaller numbers in the public sector, the one job growth area will be—which we concede—another 4,000 tax inspectors for this tax. That will be the job growth area. When you have got limited resources in the public sector and a raft of small businesses with no accounting capabilities at all, at least in-house, then you are in a very different situation from the introduction of this tax.

Professor Dixon goes a point further in his logic. He says there are swings and roundabouts as far as jobs are concerned. In the older areas of the economy and the traditional areas of production, he says there is a possibility that there will be some job growth as a result of the taxation changes that are being put in place but this will be more than offset by the massive job losses that there will be in the growth sectors of jobs in the economy. In the service industry in particular there will be massive job losses as a result of the propositions that are to be put in place here. So it is a policy which is exceptionally bad for jobs in the same way as it is a policy which is exceptionally bad for growth and for fairness and equity in the taxation system.

Because he is a bit of a smart alec, because he likes to rabbit on and because he likes to intellectually test himself out there in the community when he knows that nobody is going to test him, the Treasurer got himself trapped the other day when he talked about getting us to a five per cent unemployment target. Having copped a beating from Howard and from Costello on the campaign trail about setting quite a reasonable target in that regard, we have got the Treasurer coming up and saying, `Oh no, it is quite possible.' `I have made a mistake,' he said. You could see it come across his eyes when he made that announcement—

Mr Snowdon interjecting


Mr DEPUTY SPEAKER (Mr Nehl) —The member for the Northern Territory, have your heart attack outside.


Mr BEAZLEY —`How am I going to explain that to the rest of the world?' How he chose to explain it to the rest of the world was, `It is the tax package that creates it.' What in the tax package specifically creates it? He says, `The movement from welfare into work.' Where in the tax package is there an incentive to leave the welfare system and to go into work? Where is there in the tax package for low and middle income earners an incentive to do additional work? There is none at all. Where is there the incentive for families? In fact, for single supporting mothers there is a positive disincentive to go into the work force in the tax package because what they will find if they choose to do so is a massive loss of benefits. That is the only impact it has.

It is the height of hypocrisy for the Treasurer to stand up in this place and somehow say that this is going to occur as another article of faith. First article of faith: no modelling, there will be job growth. Second article of faith: no modelling and no argument, people will be encouraged to move from welfare to work. Why would he say that? Because he knows that the only tax packages on offer in the course of the last campaign were those which stressed they would produce jobs, were those which stressed positive incentives to get off the welfare system and to get into the work force and in the work force to work a bit of overtime. Those are the only tax packages which could be legitimately argued to improve the position of employment in this country. Guess who had that one? That was us. Prophets in Australian politics are honoured only after the elections if they come from the Labor side of the House, just as the only good Labor leaders are dead ones.


Mr DEPUTY SPEAKER —With one exception, I hope, Leader of the Opposition.


Mr BEAZLEY —In this particular instance, Mr Deputy Speaker, we have had a parade of models, a parade of economists, coming out telling the Australian people that the really decent, innovative, interesting proposition was the Labor Party tax credit proposal. A lot of water is going to flow under the bridge during this debate about tax reform in this country, and there are going to be a lot of opportunities for us to present real reform that encourages people into the work force, because we are getting none of that from this government. (Time expired)